No good news is good news, at present at least.

An oversold stock and bond market combined with little in the way of good news either political or economic has led to a bounce in bond and equity markets over the past couple of days. One or two slightly more dovish comments from members of the Federal Reserve helping to support asset prices in general. It would appear, at present at least, that the fates of bond and equity markets are linked together. Stocks tend to rally at the point when it feels the news flow is at its worst. At present, the House of Representatives has no speaker making any agreement regarding raising the debt ceiling harder. The hostilities in the Middle East add to an already uncertain geopolitical world. Recent comments from the IMF, who to be honest usually get forecasts wrong, overly bullish at the top and bearish at the bottom, talking about modest growth and inflation remaining above central banks targets for another 2 years adding to the uncertainty.

As a result of the recent fall in US stocks the equal-weighted S&P 500, in other words adjusting for the influence of the magnificent 7, is now down on the year. The rise in yields is suppressing asset growth which in turn helps drive prices lower. Recently acknowledged by comments from certain committee members

The coming days will see the start of the earnings season and this along with the latest consumer inflation report could well influence the direction of equity and bond markets into the year end. One statistic I read today almost 50% of bear markets end in October, for someone who remembers the events of October 1987, this feels a tad surprising.

I wrote a week or so ago that I was more optimistic about stocks for no other reason than that it’s easy to be bearish. It still rather feels like that. Maybe that’s part of the catalyst for the recent bounce. Later today we get the release of the minutes from the last Fed meeting, we should get a little more insight into where the doves and hawks lie.